Comtech Telecommunications Corp. (NASDAQ:CMTL) Q1 2023 Earnings Call Transcript

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Mike Latimore: Great, yes. Thank you. Yes, definitely hit the hit the ground running here, looks good. Just on the gross margin, can you just kind of go through a little bit of the drivers and headwinds you’re seeing on gross margin this year, I was trying to get a sense of where that might go over time here?

Michael Bondi: Sure, in terms of your guidance, I certainly will be mindful of that we’re only given guidance for Q2. We’re certainly in economic environment, that’s challenging, as Ken mentioned, and then we disclosed, we definitely have seen inflationary pressures, supply chains is still not running optimally. And against that background, and backdrop, we’re pleased with our performance in Q1, we think that over time, our margins will improve. But we do have a lot of backlog in our Terrestrial and Wireless Network segment. A lot of that backlog is multi-year in nature, and that was set up a year or so ago. So, it will take some time to burn off that backlog. But when — where we can, we are resetting that backlog with higher pricing that is market-based, taking into account inflationary pressures, but certainly for the rest of the year, it’s a little too early to call.

We’re pleased with the fact that we’re holding the line and able to keep that 35%. And as I pointed out last year, in Q2 — Q1, we certainly had some favorability based on the mix at the time. But when you isolate those out, we’re sitting in that mid-30% range. So, our goal and the targets for us are certainly higher. But we’re right now, we’re not going to go beyond what we’re saying for Q2 is guidance on the top and bottom-line.

Ken Peterman: I will tell you Mike — this is Ken, I’ll tell you also that that we are making great progress, I’d like to give Maria chance to jump in here. But we clearly have the bus headed in the right direction. We got the right people in the bus, we got the right people in the right seats. And we provided some details on that in the shareholder letter with respect to who some of those people are. These are seasoned veterans that have done this kind of thing before bringing businesses — siloed businesses together. And so maybe just a word from Maria, with respect to the metrics, the KPIs, the way you’re tracking that on the integrated master schedule and driving the team against their goals.

Maria Hedden: Yes. Thanks, Ken. So, just a couple things on that. So, obviously, we’ve rolled out some of our people strategy and what we’ve done with that, but clearly some of the new processes that have been instituted over the last quarter that is focused on really understanding some of our business risks, understanding those key performance indicators. As Ken mentioned, I hosted a full day session of developing what our stress objectives and what we needed to do. And really that’s driving visibility and alignment across the organization to stay focused on really being able to grow the organization, while continuing to perform day-to-day on our expectations.

Mike Latimore: Yes. Great. And then maybe just on the pipeline itself, you kind of called out the macroeconomic, geopolitical effects here, but also you’ve obviously had strong demand. So, maybe just in terms of the pipeline, how healthy is it? What areas are particularly prominent in the pipeline here?

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